HOSTESS AND BAKERS UNION AGREE TO ACCEPT MEDIATION OF STRIKE

Judge asks Hostess to mediate with union

The judge overseeing Hostess Brands declined to approve the company’s liquidation Monday and asked management and the bakers union to enter mediation today to resolve the strike that the maker of Twinkies and Wonder bread said forced it to shut.

U.S. Bankruptcy Judge Robert Drain said at a hearing in White Plains, N.Y., that there are “serious questions as to the logic behind the decision to strike.” Hostess and the union agreed to Drain’s request to enter confidential mediation under his supervision today, with the liquidation hearing set to resume Wednesday if an agreement isn’t reached.

“To me, not to have gone through that step leaves a huge question mark over this case which I think will only be answered in litigation,” Drain said. “My desire to do this is prompted primarily by the potential loss of over 18,000 jobs, as well as my belief that there is a possibility to resolve this matter, notwithstanding the losses the debtors have incurred over the last week or so.”

Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of Americans, decided Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the Irving, Texas, firm asked the court for permission to sell its assets and wind down its business, claiming that a weeklong strike by the union forced liquidation.

The union blamed mismanagement, pointing to the steep raises executives were given last year as Hostess was spiraling down toward bankruptcy.

The 82-year-old maker of Hostess CupCakes, Ding Dongs and Ho Hos, which is in its second bankruptcy in less than a decade, is seeking permission from Drain to pay as much as $1.75 million in incentive bonuses to 19 senior managers during the liquidation while closing operations that will leave most of its 18,500 workers unemployed.

The firm’s announcement last week that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats.

Even if Hostess goes out of business, its popular brands will likely find a second life after being picked up by buyers. The company says several potential buyers have expressed interest in the brands.

Although its sales have been declining in recent years, the firm still does about $2.5 billion in business each year.